Dr. Sabine Liebenehm (PhD). (Photo: Christina Weese)

Un-springing the poverty trap

How understanding attitudes toward risk and risk mitigation among the poor can lead to a better world.

We all hear stories about how a single moment can completely change the trajectory of a life. They can seem a bit apocryphal, but that’s exactly what happened to Dr. Sabine Liebenehm (PhD) when she was a second-year economics student in Hanover, Germany.

Today, Liebenehm is an assistant professor at the College of Agricultural and Bioresources in the Department of Agricultural and Resource Economics at the University of Saskatchewan (USask). So if economics is clearly a through line, what happened to change her life’s course and bring her to the Canadian prairie?

Believe it or not, it was a pamphlet left in a classroom.

“When I started with economics, the first two years was business administration and management, marketing and so on,” said Liebenehm.

As with many degree programs, the first couple of years have a general focus, then students are asked to choose a specialization. Liebenehm found much of her early coursework to be uninspiring and was restless.

“I had a friend in veterinarian studies who didn’t enjoy her first two years either, and we decided to take a break before choosing our specialization,” she said.

That’s when they saw it. “There was a flyer left in a classroom—one of those ‘backpack around the world on a thousand euros’, something like that,” said Liebenehm.

They decided that a budget travel adventure was just what they needed. First stop: Thailand.

“When I went to Thailand I had my first shock,” said Liebenehm, recounting her initial experience witnessing poverty, environmental degradation and air pollution on a scale she had not experienced before. The friends visited other developing countries during their travels and, as Liebenehm spent time with rural communities, she began to see a new direction for herself.

“I thought—I study economics, there must be something more sensible for me to study than marketing,” she said. “I saw development economics and agricultural economics as the way for me.”

And just like that, Liebenehm had identified her specialization.

Mitigating risk when you’re poor

When we think of economics, most of us think about things like supply and demand, production and consumption, and markets. But it’s worth remembering that economics is a social science and human behaviour in the face of economic realities is at the heart of Liebenehm’s work.

“In development economics, we try to understand why people are poor,” she said. “Personally, I’m trying to connect it to behavioural economics. When people are surrounded by an environment that doesn’t protect them, they don’t have safety nets at hand, such as functioning government institutions or NGOs. They may have no insurance and limited access to credit markets to help them find solutions. So how are they managing those risks?”

Liebenehm has lived and worked in agricultural communities in developing countries around the world, including Thailand, Togo, Burkina Faso, Vietnam and Mali. She looks at how local economics work, how people in these communities assess various risks to their livelihoods and families, and what actions they take to mitigate those risks—like building an irrigation system in a drought-prone area, or diversifying crops to spread market risk, or have a family member take an off-farm job to diversify income risk, or send a child to school to improve future prospects.

She wants to know what people are willing to do to alleviate the problems associated with a known risk, and what they are not willing to do in order to protect societal integrity. Liebenehm outlines her work with cattle farmers in Burkina Faso and Mali, to illustrate the point.

“They had maybe 10 animals, no access to liquidity and were at risk of livestock disease,” she said.

Common practice was to treat individual animals if they become sick, usually with special drugs from professional (but also unprofessional) sources, or traditional remedies that were not very effective, but this practice was culturally accepted and expected.

“Economic theory tells us that those who are poorer are more risk averse and impatient than wealthier people,” said Liebenehm. “What we actually found was that, while they were risk averse, these farmers were overly optimistic that their animals would be just fine, and that they were relatively patient about that.”

She explained that the farmers’ willingness to invest what little means they had in individual animals rather than herd management and tsetse fly control (the disease vector) demonstrated loss aversion.

“They were willing to sacrifice their limited liquidity to save an asset.”

Working with local vets and community leaders who could help to lead behavioural change, Liebenehm and her team were able to provide simple solutions that could be easily executed by local people with local materials. In this case, it was regular prophylactic treatments for whole herds and fencing tsetse flies couldn’t easily fly over.

Development economics in Canada

But what is Liebenehm focused on in Canada—a developed economy with a modern agricultural industry?

“Development economics can also touch on macroeconomic issues, international trade, foreign aid, environmental economics and sustainability—everything is connected to natural resources,” she said.

And Canada is nothing if not rich in natural resources.

In March, Liebenehm had just begun to work with northern Cree communities in Alberta.

“I’m working with the Little Red River Cree Nation in Fox Lake and Garden River,” she said.

The two communities have a winter access road, but in the summer, they are fly-in only.

“Economic theory tells you a road is so important to connect isolated islands,” said Liebenehm. “We would like to understand what the Nation thinks about getting connected by an all-season access road.”

On the surface, connection seems like a great thing—access to more stores and businesses, greater employment opportunities and the chance to connect with other people more easily. But the risks are there too—economic leakage as people spend their money elsewhere, the influx of disease, heavy industry (oilsands and forestry), environmental damage, and the potential loss of cultural and societal customs.

“We want to know how these communities perceive the risks and benefits of a road to their economies and way of life,” said Liebenehm.

Unfortunately, with the current pandemic, she is unable to do her favourite thing and work directly in these communities.

“I really enjoy when I go to the field and work with people and get to know how they manage their life and make decisions.”

But with the help of David Natcher, professor in the Department of Agricultural and Resource Economics, this work is proceeding remotely.

Why the poor matter

If you’re wondering whether Liebenehm’s work among the world’s poorer economies impacts you, wonder no longer—it does.

“We are all connected with each other,” said Liebenehm. “We are all in one boat, there’s only one planet. Because of our interconnectedness, there should be a big interest from the developed world to make sure people in the developing world are doing all right.”

She points to the massive migrations of people from poor, war-torn and politically unstable regions toward more stable regions because, in the end, migration is a decision made to mitigate risk.

“My focus is very narrowed on risk management and risk behaviours,” said Liebenehm, adding that this is information policy makers can use to improve the economic and environmental well-being of people in developing economies.

Of all the risks developing communities face, Liebenehm said the greatest one is climate change. Indeed, it’s a risk faced by everyone on the planet and the challenges of mitigation and adaptation will require bold economic thinking. She said the idea of the circular economy—a system of economics built on the idea reducing gratuitous waste through continual reuse of resources—is key.

“It really has to pop up and be in everybody’s mind, especially the policy makers.”

Agknowledge, December 2020
Share this story